Alipay writes US$50 million cheque as China Renaissance prepares to raise up to US$377 million in Hong Kong IPO

Chinese investment bank plans to issue 85 million shares at between HK$31.8 and HK$34.8 per share

PUBLISHED : Thursday, 13 September, 2018, 12:57pm
UPDATED : Thursday, 15 November, 2018, 4:06pm

Investment bank China Renaissance, which has advised on a number of high-profile technology mergers and acquisitions, has set the pricing range for its Hong Kong initial public offering with the aim of raising as much as HK$2.96 billion (US$377 million).

The company plans to issue 85 million shares between HK$31.8 and HK$34.8 per share, before the exercise of a “greenshoe” or over-allotment option, according to information about the initial public offering’s terms obtained by the South China Morning Post. If it exercises the option, the fundraising value could rise by up to 15 per cent to HK$3.4 billion.

China Renaissance has secured US$125 million from three cornerstone investors. Online payments company Ant Financial Services, which operates the Alipay cashless payments business, has agreed to invest US$50 million. Ant Financial is an affiliate of Alibaba, which owns the Post.

Snow Lake Funds, an Asian alternative investment manager, will put in US$50 million. LGT Group Foundation, a European private wealth and asset management firm, will invest US$25 million.

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The investment by Ant Financial comes with “no strings attached", said China Renaissance managing director Xiang Wei.

“Ant’s investment is purely a fiscal investment,” he said in Hong Kong. “In the future, China Renaissance will seek potential opportunities to work with Ant in wealth management, online securities business, and other areas.”

Founded in 2004 by Bao Fan, a former Morgan Stanley and Credit Suisse banker, China Renaissance has advised on and invested in a number of high-profile mergers and acquisitions by Chinese technology start-ups, including those between Meituan and Dazhong Dianping and between Didi and Kuaidi, as well as the acquisition of Mobike by Meituan Dianping.

It currently has three principal business lines — investment banking, investment management, and Huajing Securities, the onshore securities platform that has licences to offer underwriting, sales, trading, brokerage, and asset management services on the mainland.

“Huajing Securities will be a future business focus for us,” Bao said on Thursday at the company’s investor presentation in Hong Kong.

But Bao hopes to serve the country’s new generation of entrepreneurs and their companies “through their life cycle”, offering comprehensive services such as connecting companies at early stage with investors, advising them on M&A transactions, providing equity underwriting services for these firms to go public, subsequent capital market work after IPOs, as well as asset and wealth management.

Although Huajing currently only contributes 14 per cent to total revenues, Bao said the onshore securities unit is crucial in providing “full life-cycle coverage” to China’s new economy sectors.

“China Renaissance is known for its relationships with local entrepreneurs, compared with Western investment banking rivals,” said Ashley Li, head of asset management at Ping An Securities, after the investor presentation. “This is a people business.”

She said the company’s strategy looks viable as it intends to “grow with their clients” and expand services from advisory to asset and wealth management.

Nonetheless, challenges remain, as the firm’s business relies on China’s overall economic condition.

“When the economy slows and overall fundraising conditions tighten in China, their business is directly affected, especially the key advisory part,” she added.

Ninety per cent of China Renaissance’s offered shares are for international placement, which mainly target institutional investors.

The stock is set to debut on Hong Kong’ s main board on September 27.

Bao controls around 63 per cent of China Renaissance. Neil Shen Nanpeng, founder and managing partner of Sequoia Capital China, owns 7.5 per cent, and Li Shujin, founder and managing partner of Trustbridge Partners, holds a 7.7 per cent stake.

China Renaissance completes first steps towards Hong Kong IPO, seeks up to US$400 million

China Renaissance’s prospectus shows the company’s adjusted revenue increased by 48 per cent in 2017 to US$212 million. In the first quarter of this year, its adjusted net profit reached US$35.67 million, a fivefold increase from the same period last year, thanks to growth in its investment banking and investment management businesses.

China Renaissance plans to use the proceeds from the IPO to expand its investment banking and investment management businesses, develop a private wealth management business and invest in technology across its business lines.

The US-China trade war will not have a big impact on the bank’s international expansion plan, Bao said.

“Southeast Asia is the first market that we want to consider entering for our investment banking business, as they are emerging markets and it’s easy to copy our service model in China for these markets,” he said. “In terms of investment management business, we will also seek potential investment opportunities in the US, Europe and Japan for our Chinese clients.”